State excise policy requiring cluster-based liquor license renewals and minimum district-wide participation thresholds is constitutionally valid.

The petitioners, existing liquor licensees in Rajasthan, challenged the constitutional validity of Clauses 2.2.6, 2.2.7, and 2.2.8 of the Rajasthan Excise & Temperance Policy 2025–2029.

The new policy introduced a "cluster" system where shops were grouped (1–5 shops) for settlement.

Under the impugned clauses, renewal of an individual license was made conditional upon: (a) at least 70% of eligible licensees in the district applying for renewal, and (b) all shops within a specific cluster applying for renewal.

If these conditions were not met, the shops were subjected to e-auction.

The petitioners, despite fulfilling individual eligibility and paying fees, had their renewals cancelled/non-considered because other shops in their respective clusters remained unrenewed or the district threshold was not met.

The Court applied the principle that there is no fundamental right to trade in liquor under Article 19(1)(g), as liquor is res extra commercium, establishing that the State holds "exclusive privilege" over its regulation.

This was based on the precedent in Khoday Distilleries Ltd. v. State of Karnataka (1995).

Furthermore, the Court invoked Section 37 of the Rajasthan Excise Act, 1950, which explicitly states that no person has a claim to the renewal of a license.

While State action must not be "manifestly arbitrary" under Article 14, the Court noted that Article 47 (Directive Principles) mandates the State to endeavor toward prohibition, further strengthening State regulatory powers.

The Court reasoned that the "cluster" mechanism and the 70% district-wide threshold are policy decisions aimed at revenue optimization, administrative efficiency, and preventing "fallow" unregulated areas.

It held that the State is entitled to adopt collective settlement mechanisms to secure revenue and uniformity, and the linked nature of renewals does not equate to "manifest arbitrariness."

The court emphasized that formulation of excise policy involves complex fiscal considerations where judicial interference is minimal unless there is "hostile discrimination," which the petitioners failed to prove.

Furthermore, the Court noted that the petitioners had submitted renewal applications after accepting the policy's terms, thereby attracting the principle of estoppel—they could not challenge the conditions once the outcome became unfavorable.

It ruled that the petitioners have no fundamental or vested right to renew their licenses.

Consequently, the High Court dismissed the entire batch of writ petitions, upholding the validity of the Rajasthan Excise & Temperance Policy 2025–2029 and the State’s right to conduct e-auctions for the disputed clusters.